Martinez v. CitiMortgage, Inc.

Filing 16

MEMORANDUM AND ORDER (Signed by Judge Nancy F. Atlas) Parties notified.(sashabranner, )

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION

PHILLIP MARTINEZ,
Plaintiffs,
v.
CITIMORTGAGE, INC.,
Defendant.

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CIVIL ACTION NO. H-13-0727

MEMORANDUM AND ORDER
This case is before the Court on the Motion to Dismiss [Doc. # 12] filed by
Defendant CitiMortgage, Inc. (“CMI”), to which Plaintiff Phillip Martinez filed a
Response [Doc. # 13], and CMI filed a Reply [Doc. # 15]. Having reviewed the full
record and applicable legal authorities, the Court grants the Motion to Dismiss as to
the trespass to try title and breach of contract claims, and denies the Motion as to the
fraud claim.
I.

BACKGROUND
On June 11, 2007, as part of his purchase of property in Channelview, Texas

(the “Property”), Plaintiff executed a Note for $75,000.00 payable to Fieldstone
Mortgage Company (“Fieldstone”). Plaintiff also executed a Deed of Trust with
Fieldstone as the Lender, Mortgage Electronic Registration Systems, Inc. (“MERS”)

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as the Beneficiary, and Rob V. Budhwa as the Trustee. The Note and Deed of Trust
were transferred to CMI, who acted also as the loan servicer.
During the term of the loan, Plaintiff began to experience financial difficulties.
Plaintiff alleges that he contacted CMI and “entered into debt restructuring
negotiations in order to modify the terms and conditions of the Note.” See First
Amended Complaint [Doc. # 10], ¶ 8. Plaintiff alleges that during the course of the
loan modification process, CMI’s “representatives informed [him] that he was not
allowed to make any mortgage payments while in loan modification status.” Id., ¶ 9.
Plaintiff alleges further that CMI’s representatives “informed him that he was to
ignore any foreclosure notices that he received while in loan modification status [and]
that they would not take any action to foreclose on the Property while in loan
modification status.”

Id.

Plaintiff alleges that CMI wrongfully conducted a

foreclosure sale of the Property on November 6, 2012.
Plaintiff filed this lawsuit in Texas state court, asserting causes of action for
trespass to try title, breach of contract, and common law fraud. On March 15, 2013,
CMI filed a timely Notice of Removal. CMI then filed a Motion to Dismiss, after
which Plaintiff filed his First Amended Complaint. Defendant filed a Motion to
Dismiss the First Amended Complaint, which has been fully briefed and is ripe for
decision.

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II.

STANDARD FOR MOTION TO DISMISS
When considering a motion to dismiss, the complaint must be liberally

construed in favor of the plaintiff, and all facts pleaded in the complaint must be taken
as true. Harrington v. State Farm Fire & Cas. Co., 563 F.3d 141, 147 (5th Cir. 2009).
When there are well-pleaded factual allegations, a court should presume they are true,
even if doubtful, and then determine whether they plausibly give rise to an entitlement
to relief. Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). Although a motion to dismiss
under Rule 12(b)(6) of the Federal Rules of Civil Procedure is viewed with disfavor
and is rarely granted, Turner v. Pleasant, 663 F.3d 770, 775 (5th Cir. 2011) (citing
Harrington, 563 F.3d at 147), a complaint must contain sufficient factual allegations,
as opposed to legal conclusions, to state a claim for relief that is “plausible on its
face.” See Iqbal, 556 U.S. at 678; Patrick v. Wal-Mart, Inc., 681 F.3d 614, 617 (5th
Cir. 2012).
III.

ANALYSIS
A.

Trespass to Try Title Claim

“An action in trespass to try title is the method of determining title to lands,
tenements, or other real property.” Hurd v. BAC Home Loans Servicing, LP, 880 F.
Supp. 2d 747, 767 (N.D. Tex. 2012) (quoting TEX. PROP. CODE § 22.001). In general,
a trespass to try title claim is “to recover the possession of land unlawfully withheld

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from the owner and to which he has the right of immediate possession.” Id. (quoting
Rocha v. Campos, 574 S.W.2d 233, 236 (Tex. App. – Corpus Christi 1978, no writ))
To state a claim for trespass to try title, the plaintiff must allege, inter alia, that the
defendant “unlawfully entered upon and dispossessed him of such premises, stating
the date, and withholds from him the possession thereof.” See TEX. R. CIV. P. 783(e);
see also Tex. R. Civ. P. 784 (“The defendant in the action shall be the person in
possession if the premises are occupied, or some person claiming title thereto in case
they are unoccupied.”).
Plaintiff does not alleges that CMI has dispossessed him of the Property.
Indeed, he alleges specifically that he is “currently in possession of the Property.” See
First Amended Complaint, ¶¶ 12, 14. As a result, Plaintiff has failed to plead a viable
trespass to try title claim, and Defendant’s Motion to Dismiss the claim is granted.
B.

Breach of Contract Claim

Plaintiff alleges that CMI breached a contract because it entered into an oral
contract whereby it promised not to take any action to foreclose on the property while
the parties were in loan modification negotiations. See id., ¶ 16. Under Texas law, the
statute of frauds requires all loan agreements involving more the $50,000.00 to be in
writing and signed by the party to be bound in order to be enforceable. See TEX. BUS.
& COM. CODE § 26.02(b). A “loan agreement” for purposes of the statute of frauds

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is defined to include promises by a financial institution to “delay repayment of money
. . . or make a financial accommodation.” See TEX. BUS. & COM. CODE § 26.02(a)(2).
Plaintiff’s claim that Defendant promised not to foreclose during the loan modification
process is barred by the Texas statute of frauds. See Burnette v. Wells Fargo Bank,
N.A., 2010 WL 1026968, *5 (E.D. Tex. Feb. 16, 2010) (quoting Krudop v. Bridge City
State Bank, 2006 WL 3627078, *4 (Tex. App. – Beaumont Dec. 14, 2006, pet.
denied)).
Plaintiff, in his Response to the Motion to Dismiss, explains that he is not
alleging that CMI breached a new oral agreement not to foreclose but is, instead,
asserting that CMI cannot argue that he is in default under the original loan agreement
because CMI induced the default. See Response [Doc. # 13], pp. 1-2. Plaintiff cites
Montalvo v. Bank of Am. Corp., 864 F. Supp. 2d 567, 582 (W.D. Tex. 2012), to
support his argument. Plaintiff’s reliance on the Western District of Texas’s 2012
opinion in Montalvo is unavailing. In 2013, the Montalvo court held unequivocally
that any claim of “waiver fails because the claim would solely rely on evidence of
unenforceable oral representations allegedly made by Defendants.” Montalvo v. Bank
of Am. Corp., __ F. Supp. 2d __, 2013 WL 870088, *8 (W.D. Tex. Mar. 7, 2013).1

1

The 2012 Montalvo decision was on review of a Magistrate Judge’s Report and
Recommendation. The district court noted that the Magistrate Judge treated the
plaintiff’s claim as a claim to enforce an alleged oral modification rather than a claim

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The Montalvo court in 2013 noted that allowing a borrower to avoid foreclosure by
arguing that he was induced to default based on an oral promise not to foreclose
during loan modification negotiations “would allow Plaintiff to circumvent the statute
of frauds by essentially enforcing an unenforceable modification agreement.” Id.
This Court agrees. Plaintiff’s breach of contract claim, even as clarified in the
Response, is barred by the Texas statute of frauds. As a result, Defendant’s Motion
to Dismiss the breach of contract claim is granted.
C.

Fraud Claim

Defendant argues that Plaintiff’s fraud claim should be dismissed for failure to
comply with the pleading requirements of Rule 9 of the Federal Rules of Civil
Procedure.2 Rule 9(b) requires that “[i]n all averments of fraud or mistake, the
circumstances constituting fraud or mistake shall be stated with particularity.” FED.
R. CIV. P. 9(b); see Leatherman v. Tarrant Cty. Narcotics Intelligence Unit, 507 U.S.

that the defendant could not assert that the plaintiff was in default under the original
loan agreement because the defendant induced the default. See Montalvo, 864 F.
Supp. 2d 567, 584 (W.D. Tex. 2012). As a result, the district judge directed the
defendant to file a supplemental motion. Once the issue had been defined by the
supplemental motion and briefed by the parties, the Montalvo court in 2013 ruled that
the breach of contract claim based on a “waiver” or related theory failed because it
relied on unenforceable oral representations that were within the statute of frauds. See
Montalvo, __ F. Supp. 2d __, 2013 WL 870088, *8 (W.D. Tex. Mar. 7, 2013).
2

Defendant states affirmatively that it “does not argue Plaintiff’s fraud claim is barred
by the economic loss rule.” See Reply [Doc. # 15], p. 3.

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163, 168-69 (1993); Hart v. Bayer Corp., 199 F.3d 239, 247 n.6 (5th Cir. 2000). In
particular, the pleadings should “specify the statements contended to be fraudulent,
identify the speaker, state when and where the statements were made, and explain why
the statements were fraudulent.” Southland Securities Corp. v. INSpire Ins. Solutions,
Inc., 365 F.3d 353, 362 (5th Cir. 2004) (quoting Williams v. WMX Technologies, Inc.,
112 F.3d 175, 177-78 (5th Cir. 1997)); see also Shandong Yinguang Chem. Indus.
Joint Stock Co., Ltd. v. Potter, 607 F.3d 1029, 1032 (5th Cir. 2010) (“Put simply, Rule
9(b) requires the who, what, when, where, and how to be laid out.” (internal quotation
marks and citation omitted)). Rule 9(b) requires a plaintiff to allege the existence of
facts sufficient to warrant the pleaded conclusion that fraud has occurred. See In Re
Haber Oil Co., 12 F.3d 426, 439 (5th Cir. 1994). While fraud must be plead with
particularity, it “may be pleaded without long or highly detailed particularity.” Guidry
v. United States Tobacco Co., 188 F.3d 619, 632 (5th Cir. 1999).
Plaintiff identifies with particularity the allegedly fraudulent statements.
Plaintiff alleges that CMI’s “representatives informed [him] that he was not allowed
to make any mortgage payments while in loan modification status.” See First
Amended Complaint, ¶¶ 9, 18. Plaintiff alleges that CMI’s representatives also
“informed him that he was to ignore any foreclosure notices that he received while in
loan modification status [and] that they would not take any action to foreclose on the

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Property while in loan modification status.” Id. Although Plaintiff does not identify
the speaker by name, his First Amended Complaint can reasonably be understood to
allege that the statements were made by CMI’s representatives with whom he dealt in
connection with the loan modification negotiations. See id. Plaintiff identifies the
time frame during which the statements were made – during the loan modification
process prior to the foreclosure on November 6, 2012. See id., ¶¶ 9-11. Plaintiff
alleges that the representations were false, and that CMI made the statements as
positive assertions either knowingly or recklessly. See id., ¶ 18. Plaintiff alleges that
CMI intended that he act in reliance on the representations, that he actually relied on
the statements, and that he suffered resulting injury when CMI foreclosed on his home
and purchased it at the foreclosure sale. See id., ¶¶ 11, 18.
Plaintiff has satisfied the pleading requirements of Rule 9, and Defendant’s
Motion to Dismiss the fraud claim is denied.
IV.

CONCLUSION AND ORDER
Based on the foregoing, it is hereby
ORDERED that Defendant CitiMortgage, Inc.’s Motion to Dismiss [Doc. # 9]

is GRANTED as to the trespass to try title and breach of contract claims and
DENIED as to the fraud claim. All deadlines in the Court’s Docket Control Order
[Doc. # 9] remain in effect.

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28th
SIGNED at Houston, Texas this _____ day of May, 2013.

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